Common Personal Tax Return mistakes and how to avoid them

If you’re a director of your own limited company or a secondary shareholder of a limited company, you’re required to fill out and submit a Personal Tax Return, aka a self-assessment, to HMRC. Here are some common mistakes made when completing tax returns, and how to avoid them.

1. You’ve left it too late

Paper tax returns are due to HMRC by 31 October 2017 for the 2016/17 tax year, and online returns are due by 31 January 2018. In mid-January of 2017, almost 55% of people required to submit a tax return still had not done so, and in January 2016 around 870,000 didn’t submit their Personal Tax Returns to HMRC by the deadline.

Whilst it seems like common advice to say ‘stick to the deadline’ or ‘leave yourself plenty of time’, the unexpected does happen. Lost information, disorganisation, or a personal emergency could delay you from completing your return. However if you’re only leaving yourself a week or two to begin with, you’re cutting it too close. It’s recommended that you complete your tax return as early as you possibly can – and here’s why.

One important reason is the possibility to have your tax return completed by an accountant for a low fee – and avoid dealing with the annoyance of completing it yourself. Churchill Knight & Associates Ltd, who has completed over 20,000 Personal Tax Returns, is currently offering 33% off the regular fee until 31st August only – you just have to provide the relevant income information by then to get the offer.

2. Declaring incorrect figures or omitting figures

This mistake can result in penalties for submitting incorrect information or omitting income information on purpose. These are as follows:

If the error shows you did not take reasonable care to ensure the information was correct, the penalty could be between 0% and 30% of the extra tax due as a result of the error

If you deliberately created an error on your tax return, the penalty is 20% to 70% of the extra tax due

If you deliberately created and concealed the error, the penalty is between 30% and 100% of the extra tax due

This is why accounting software providers recommend you have an accountant go over your tax return figures, even if you fill in the forms yourself with the help of the software.

Accountants are able to catch discrepancies and, due to their expertise, can complete your self-assessment for you without errors as long as you provide them with accurate information.

If you complete your tax return and submit it to HMRC, but later realise there is an error, you can correct the error by changing it – the deadline for which is the 31st of January 2019 for the 2016/17 tax year.

3. Excluding additional income sources (supplementary pages)

There are additional sources of income that you may have from the 2016/17 tax year that must be declared on your Personal Tax Return, on what’s known as ‘supplementary pages’. For example, if you declare your regular income as a limited company contractor, but you also own a property which you rent out, you have to include your property income on your tax return’s supplementary pages.

Here are some other income sources that need to be claimed on supplementary pages:

Interest, securities and accrued income profits

Life insurance gains

Stock dividends, bonus issues of securities and redeemable shares

Business receipts taxed as income of an earlier year

Married Couple’s Allowance

Loss relief claims

Income from property

If you’re confused about any additional income that you may need to include on your tax return, an accountant can help you complete your forms and let you know what you’re required to declare.

4. Stating the wrong Unique Tax Reference (UTR) number

As you may know, your UTR number is required on your tax return so that HMRC can identify you. Before you are able to submit a Personal Tax Return, you must ‘register for a self-assessment’ at which point you will receive your UTR number.

If you fill in your UTR number incorrectly on your tax return, it could result in processing delays by HMRC – which could be detrimental if you’re leaving it until the last minute.

It’s essential that you make sure your UTR number is correct, whether you’re filling in an online return or a paper form. If you’re enlisting an accountant to complete your tax return, double-check that you are providing them with the correct UTR number.

5. Claiming incorrect expenses, or over/under-declaring expenses

When you are a director, there are many expenses you can claim through your limited company. However, any expense claims you make on your Personal Tax Return must be reasonable and related to your limited company.

If you inflate the expense claim or generally claim an incorrect figure and an HMRC investigation reveals this, you could be subject to penalties as previously mentioned.

You must also only claim expenses where they are allowable. For example, if you are claiming rental property income, you are able to claim certain expenses such as general maintenance and repairs, council tax, and accountant’s fees. However, you are not able to claim mortgage payments (interest excluded) or personal expenses.

The lesson to take away is that if you’re unsure about anything regarding your Personal Tax Return, seek advice. It’s simply not worth the risk of making a mistake, especially if your situation is complex – such as if you have various income sources. This is why it’s easiest to have an accountant who can, at the least, look over your Personal Tax Return before you submit it to HMRC.

An accountant will know the ins and outs of what’s allowable, what isn’t, and what should be included on your tax return provided you have given them the correct information.

If you would like any help with completing and submitting your Personal Tax Return, contact our specialists on 01707 671648 or email personaltax@churchill-knight.co.uk. We’re offering 33% off the regular fee of your Personal Tax Return until 31st August, and £50 for each referral you make to our Personal Tax Return service.